Workers earning the National Living Wage could see around £71 extra paid into their workplace pension over a year from April 2027, following the increase announced in the Autumn Budget.
The minimum hourly rate for workers aged 21 and over will rise by 3.9 per cent from £12.71 to £13.20, as set out by Chancellor John Healey on Wednesday. Pension experts have pointed to a less obvious benefit, with eligible workers also set to receive higher contributions towards their retirement savings.
Kate Smith, Head of Pensions at Aegon, estimated that someone earning the new National Living Wage could receive around £71 extra into their workplace pension over a year, based on minimum automatic enrolment contributions. The increase would come from a combination of employee and employer pension contributions, helping workers build up savings without making additional voluntary payments.
Wage increase and pension contributions
Smith said: "At a time of continuing cost of living pressures, this will bring welcome relief to many, boosting their earning power." She added: "The increase would exceed September's CPI inflation rate of 3.5% and match the 3.9% uplift in the basic and full new State Pensions under the triple lock next April."
The pensions expert said the increase would also support younger workers saving for retirement, with both low-paid employees and State Pension recipients receiving similar percentage increases. However, she noted that the new National Living Wage would remain below the voluntary real Living Wage, currently £15.45 an hour in London and £14.10 elsewhere in the UK.
New National Minimum Wage rates from April 2027
The National Living Wage for workers aged 21 and over will increase to £13.20 an hour from April 1, 2027, up from £12.71. The current minimum hourly rates for other age groups, which have applied since April 2026, are:
- Aged 18 to 20: £10.85
- Under 18: £8.00
- Apprentices: £8.00
The full updated rates for April 2027 will be available on the GOV.UK National Minimum Wage rates page. The apprentice rate applies to workers aged under 19, or those aged 19 and over in the first year of their apprenticeship. Apprentices aged 19 and over who have completed their first year are entitled to the minimum wage for their age.
How much extra could go into workplace pensions?
Aegon's calculations are based on someone working 35 hours a week, earning £24,024 annually at the new £13.20 hourly rate. Using the current qualifying earnings threshold of £6,240 and the minimum automatic enrolment contribution of eight per cent, this would result in £1,422.72 being paid into their pension over a year, including contributions from the employee, employer and applicable tax relief.
Smith said: "A hidden benefit is that the increase in the National Living Wage will also have a positive impact on pension contributions, enabling employees to build up larger pension pots for a more secure retirement." She added: "Many employees may receive more into their pension if their employer pays higher pension contributions than the auto-enrolment minimum. This may not seem much, but the earlier and longer pension contributions are made, the bigger the likely pension when individuals come to retire."
How workplace pension contributions work
Under automatic enrolment rules, eligible workers are placed into a workplace pension scheme, with their employer required to contribute towards their retirement savings. According to The Pensions Regulator, the minimum total contribution is eight per cent of qualifying earnings, with employers paying at least three per cent. The remaining five per cent normally comes from the employee's contributions and tax relief.
For the 2026/27 tax year, qualifying earnings are generally between £6,240 and £50,270 annually. The thresholds for 2027/28 have not yet been confirmed. Workers can check their payslips or contact their employer to establish how much is being paid into their workplace pension and whether their employer offers contributions above the statutory minimum.
